Let them eat (egg-free) cake: U.S. consumer sentiment sinks amid layoffs and inflation, wealthiest 10% drive economy

Although it wasn’t actually Marie Antoinette who said, “let them eat cake”, the interpretation remains clear – the phrase is synonymous with the French aristocracy being out of touch with the economic plight of their citizens amid the French Revolution. Today, consumer sentiment data indicates cracks in our economic foundation as top earners account for 49.7% of all spending and almost one-third of gross domestic product, according to the Wall Street Journal. This demonstrates a record-high point across data that dates back to 1989, according to Moody’s Analytics, and has big implications for retailers across all segments.

According to the University of Michigan’s latest survey, consumer sentiment has dropped a stunning 27% YoY and continues to plummet as concerns over job security, inflation, and a volatile stock market climb:

Consumer sentiment: A quick rundown of the data

Middle- and working-class spending is in free fall – a traditional marker of economies on the brink of recession.

While diversified consumer spending would provide greater economic stability, the data skews in the opposite direction:

• Walmart CEO Doug McMillon noted that budget-conscious consumers are buying smaller pack sizes and being more selective, while also “feeling more frustration and pain because of high food prices”.
• McDonald’s revenue has seen the worst drop in U.S. sales since the pandemic, with “fast-food as a luxury” becoming a rising trend. Despite this, their shares of rose almost 5% “as executives predicted sales would improve in 2025.”
• 65% of consumers reported living paycheck-to-paycheck in December of 2024.
• Costco’s financial projections fell short during the first fiscal quarter, citing “tariffs and other macroeconomic uncertainties” as the cause.
• Citigroup credit card transaction data from February shows a 9.3% decrease in consumer spending on luxury items, and a 5.9% drop in January.
• 71% of leaders cited price inflation, interest rate volatility, and liquidity risk as major concerns in a recent study.
• U.S. consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell for the first time in two years. It’s the biggest decrease in almost four years.
• Retail sales declined in 7 out of 13 product categories: food services fell 1.5%, gasoline stations fell -1%, clothing decreased -0.6%, motor vehicle and parts dealers fell -0.4%, sporting goods, hobby, musical instrument, and book stores fell -0.4%, miscellaneous store retailers sales were down -0.3%, and electronics & appliance stores fell -0.3%.
• Delta, Southwest, and American Airlines downgraded their revenue forecasts for the first quarter compared to earlier projections.
• U.S. economic growth outlook has been lowered by the OECD, citing policy uncertainty and the possible impact from tariffs.
• Credit card debt and payment delinquencies are at the highest point since The Great Recession, which spanned from spanned from December 2007 to June 2009.

As macroeconomic signals underscore the rising concern over the state of the economy, operational efficiency will be the focus of the c-suite, with companies keeping an eye on costs while seeking out more revenue-generating optimizations and new business models.

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It’s all about the eggs  – until it isn’t

Despite voters in the US frequently hearing about the price of eggs in a run-up to the presidential elections, they’ve not seen an improvement in prices since – although wholesalers have.

In fact, over the last three weeks, the price of eggs for wholesalers has dropped nearly 50%, but those price reductions have yet to be passed down to consumers. 

As Americans search for more and more ways to cut costs, concerns and frustrations are mounting that rising prices won’t ever make their way back down. This leaves an uncomfortable and widening gap in the economy where the wealthy are spending freely, but most consumers are increasingly searching for ways to pinch pennies – if those high earners reduce spending, or if companies don’t make their financial projections, a tsunami of economic grief could be felt across the entire globe.

Simultaneously, layoffs are continuing at a dizzying pace – despite employees meeting their KPIs and companies stating they’re more financially successful than ever – leaving consumer confidence for both the short- and long-term in a precarious position while inflation expectations continue to rise. Meanwhile, those employees who are able to retain their jobs, including high-performers, are seeing minimal wage increases, which bodes poorly for any sort of economic growth.

What companies can do

Though the economy continues to teeter, companies can proactively fortify their bottom lines for the long term by improving internal systems and processes:

• Proactively identify risks and vulnerabilities and have contingency plans in place
• Utilize technology to improve organizational efficiencies and foster environments that value open communication
• Keep an eye on service resolutions and customer satisfaction – it’s far easier to lose a customer and much more expensive to earn one
• Assure supply chain agility by diversifying suppliers and identifying risk-mitigation strategies

As for consumers whose fate is increasingly dependent upon the ruling class and political scenarios well beyond their control, one might consider not mentioning cake.